So what exactly is behavioral economics and why is it a useful tool for motivating behaviors?
Behavioral economics is the use of psychological, social, cognitive, or emotional factors to influence a person's behavior when it comes to making economical decisions.
An excellent example of this in workforce wellness is when employers use incentives to encourage or discourage a specific thought or action.
In a blog post earlier this year, Compensation Cafe used smoking as an example of a behavior that many employers may want to discourage, since it's both unhealthy and disruptive. The challenge is doing so in an effective and non-offensive manner.
The following are five different types of behavioral economics to facilitate change, using smoking cessation as an example.
Fear of Loss
Data shows that employees are more motivated by the fear of possibly losing a privilege or benefit than by the anticipation of gaining a new or improved benefit.
So when it comes to smoking, for example, a company might want to consider raising insurance premiums and deductibles for smokers, thereby causing smokers to have to cough up extra cash they may not have (e.g. losing their spending money).
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More people will take action if they know it will result in immediate versus delayed gratification. According to Compensation Cafe, most people don’t bother with healthy choices because the results won’t be seen for a while.
Exercise, for example, results in immediate soreness, yet no noticeable change in appearance, at least not right away. This makes exercise and other commitments which build benefits on a compounding basis frustrating for a lot of people.
According to behaviorialeconomics.com, the same can be said for smoking. The immediate gratification of smoking is typically relaxation, brought-on by soothing an addiction, but the long-term effect can be deadly. So it’s tough to incentivize quitting, but an employee might stop smoking if they reap instant benefits from doing so, such as monetary prizes, a drastic reduction in their insurance premiums and deductibles, or other incentives.
Trends and Belonging
If an employee becomes aware that a particular action is a trend or a popular behavior, they are more likely to follow the trend or engage in that behavior themselves.
For example, if other employees are taking trips to the gym, an employee might be more likely to go along. Or, if there is a group effort to stop smoking, employees might be more willing to "jump on the bandwagon," knowing they can be part of the group of smokers who are working together to quit.
Clearly defining the positive results of a certain behavior helps to assign value to a behavioral change.
A good example would be showing how much weight a person can lose if they visit a gym regularly and work out for a set period of time and duration, say, for example, 3x per week, 30 minutes each visit, for three months straight.
This could also mean educating employees about heart disease, cancer, and other risks associated with smoking, thereby highlighting the value of being a non-smoker.
Another great tip is to offer freebies. Emphasizing that a free smoking seminar or other quitting tool you're offering would normally be costly can make people feel they are getting a deal by joining in.
Compensation Cafe describes nudging as sending messages that either consciously or subconsciously open the door for employees to behave in a certain way.
The Economist uses the example of the country of Singapore announcing their public policy changes through cartoons, in order to make all news sound like good news.
When it comes to smoking, employers might try offering gum and candy in the cafeteria or posting information about quitting support groups, instead of focusing on the negatives of smoking.
Increase Positive Behavior in Employees
As you can see, there are a number of approaches to choose from in order to apply behavioral economics and increase positive behavior in the workplace. Understanding your employees, their behaviors and their goals can also guide you ing designing options that are most likely to succeed.
*This post was originally published on June 7, 2016.